Journal Article

Macroeconomic Stability in Developing Countries: How Much Is Enough?

Peter Montiel and Luis Servén

in The World Bank Research Observer

Published on behalf of World Bank

Volume 21, issue 2, pages 151-178
Published in print January 2006 | ISSN: 0257-3032
Published online August 2006 | e-ISSN: 1564-6971 | DOI:
Macroeconomic Stability in Developing Countries: How Much Is Enough?

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Over the 1990s macroeconomic policies improved in most developing countries, but the growth dividend from this improvement fell short of expectations, and a policy agenda focused on stability turned out to be associated with a multiplicity of financial crises. This article examines the contents and implementation of the macroeconomic reform agenda of the 1990s. It reviews the progress achieved through fiscal, monetary, and exchange rate policies across the developing world and the effectiveness of the changing policy framework in promoting stability and growth. The main lesson is that more often than not slow growth and frequent crises resulted from shortcomings in the reform agenda of the 1990s. These concern limitations in the depth and scope of the reform agenda, its lack of attention to macroeconomic vulnerabilities, and its inadequate attention to complementary reforms outside the macroeconomic sphere.

Journal Article.  10691 words.  Illustrated.

Subjects: Development Planning and Policy

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